Examining the Evolving Correspondence Between Petroleum Prices and Agricultural Commodity Prices
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Over the last few years, the production of renewable fuels has increased dramatically. Rising oil prices, limited supplies of fossil fuel, and increased concerns about global warming have created a growing demand for renewable energy sources. Both the ethanol and biodiesel industries have experienced tremendous growth in the past few years. The production of these fuels is highly dependent on the availability of agricultural feedstocks. This research examined the covariability between crude oil prices and corn, sorghum, sugar, soybeans, soybean oil, and palm oil prices during the 2003-2007 time period. Johansen cointegration tests revealed no cointegrating relationships during the 2003-2005 time frame. However, corn prices and soybean prices were cointegrated with crude oil prices during the 2006-2007 time period.